MUDRA SECURITIES, Mumbai V. ITO WARD 30(2)(2), Mumbai

ITA 1944/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1918 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANPREET SINGH DUGGAL
• Assessee Lawyers: NEELKANTH KHANDELWAL LD
• Keywords: Transactions in derivatives; Tax effect; Onus to prove; Reassessment proceedings
• Section: 148

Judgement Text

ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.1944/MUM/2019 ( / ASSESSMENT YEAR:2010-11) MUDRA SECURITIES 401/402, BUSINESS CLASSIC CHINCHOLI BUNDER ROAD MALAD (W), MUMBAI-400 064. / VS. INCOME T AX OFFICER - WARD - 30(2)(2) C-13, ROOM NO.513, 5 TH FLOOR BANDRA KURLA COMPLEX MUMBAI-400 051. ! ./ ./PAN/GIR NO. AAHFM-5035-E ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : SHRI NEELKANTH KHANDELWAL- LD. AR REVENUE BY : SHRI MANPREET SINGH DUGGAL SR. DR / DATE OF HEARING : 10/11/2020 / DATE OF PRONOUNCEMENT : 08/12/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-50, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.CIT(A)-50/10295/2017-18 DATED 07/02/2019 ON CERTAIN ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 2 GROUNDS. HOWEVER DURING THE COURSE OF HEARING, LD. AR FOR ASSESSEE PRESSED ONLY FOR GROUND NOS. 2 & 3 WHICH READ AS UN DER: - 2. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED I N CONFIRMING A SUM OF RS.85,29,160/- BEING ALLEGED UNDISCLOSED PROFIT ON FUTURE AND OPTION TRANSACTION IN SHARES WITHOUT APPRECIATING THE FULL FACTS OF THE C ASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE C ONFIRMED THE SAID SUM OF RS.85,29,160/-. (TAX EFFECT: RS.26,35,510) 3. ON FACTS AND IN LAW, THE LD. CIT(A] HAD ERRED IN UPHOLDING A SUM OF RS.73,703/- BEING COMMISSION EARNED FROM CONTRA PARTIES ON CLIE NT CODE MODIFICATION WITHOUT APPRECIATING THE FULL FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE UPHELD THE SAID SUM OF RS.73,703/-. (TAX EFFECT: RS.22,774/-) IT IS EVIDENT THAT THE ASSESSEE IS AGGRIEVED BY PAR T CONFIRMATION OF ADDITIONS ON ACCOUNT OF CLIENT-CODE MODIFICATION (C CM) TO THE EXTENT OF RS.85.29 LACS. GROUND NO. 3 IS CONSEQUENTIAL GROUND WHICH CONTESTS THE ACTION OF LD. AO IN ESTIMATING COMMISSION ON CERTAI N TRANSACTIONS. 2. WE HAVE CAREFULLY HEARD RIVAL SUBMISSIONS AND PE RUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER BOOK. THE LD. AR SHRI NEEL KHANDELWAL, ENUMERATING THE FACTUA L MATRIX, HAS RELIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS WHICH HAVE DUL Y BEEN DELIBERATED UPON BY US. THE LD. SR. DR, SHRI MANPREET SINGH DUG GAL, ON THE OTHER HAND, SOUGHT DISMISSAL OF THE APPEAL ON THE BASIS O F SURROUNDING CIRCUMSTANCES AND PREPONDERANCE OF PROBABILITIES. O UR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN S UCCEEDING PARAGRAPHS. IN THIS APPEAL, WE ARE CONCERNED ONLY W ITH ADDITION OF RS.85.29 LACS AGAINST CATEGORY-3 TRANSACTIONS, THE DETAILS OF WHICH HAVE ALREADY BEEN TABULATED ON PAGE NOS. 67 TO 69 OF THE IMPUGNED ORDER. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESI DENT FIRM IS STATED TO BE ENGAGED IN TRADING OF SHARES AND DERIVATIVES. IT WORKS AS A SUB-BROKER ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 3 FOR ANOTHER ENTITY NAMELY M/S INVENTURE GROWTH & SE CURITIES LTD. (IGSL). THE ASSESSEES CASE FOR YEAR UNDER CONSIDERATION WA S SUBJECTED TO REASSESSMENT PROCEEDINGS PURSUANT TO RECEIPT OF CER TAIN INFORMATION FROM DIRECTOR OF INCOME TAX (INTLL. & CRIMINAL INV. ), MUMBAI REGARDING TAX EVASION THROUGH CLIENT-CODE MODIFICATION (CCM) WITH A VIEW TO REDUCE OVERALL TAX LIABILITIES BY SHIFTING PROFITS. ACCORD INGLY, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 ON 19/03/201 5 AS PER DUE PROCESS OF LAW AND AN ASSESSMENT WAS FRAMED U/S 143 (3) R.W.S. 147 ON 23/02/2016 WHEREIN THE ASSESSEE WAS SADDLED WITH AD DITIONS OF RS.347.17 LACS ON ACCOUNT OF ALLEGED UNDISCLOSED PR OFIT ON FUTURE AND OPTION (F&O) TRANSACTIONS IN SHARES. AGAINST THESE TRANSACTIONS, THE COMMISSION WAS ESTIMATED AT RS.3 LACS WHICH WAS ALS O ADDED TO THE INCOME OF THE ASSESSEE. HOWEVER, UPON FURTHER APPEA L, LD. CIT(A) PROVIDED SUBSTANTIAL RELIEF TO THE ASSESSEE BUT SUS TAINED ADDITION TO THE EXTENT OF RS.85.29 LACS WITH RESPECT TO CATEGORY-3 TRANSACTIONS (AS PER DETAILS GIVEN ON PAGE NOS. 67 TO 69 OF IMPUGNED ORD ER). IT APPEARS THAT THE REVENUE IS NOT IN FURTHER APPEAL AGAINST THE SA ME. HOWEVER, THE ASSESSEE HAS ASSAILED THE ADDITIONS AS SUSTAINED BY LD. CIT(A). 3.2 DURING ASSESSMENT PROCEEDINGS, BASED ON THE INF ORMATION SO RECEIVED BY THE DEPARTMENT, THE DETAILS OF CLIENT C ODE MODIFICATION AS RECEIVED FROM NATIONAL STOCK EXCHANGE (NSE) WAS CON FRONTED TO THE ASSESSEE. IT WAS NOTED THAT A TOTAL OF 2720 MODIFIE D TRADES WERE DISTRIBUTED AMONGST 34 ENTITIES, THE DETAILS OF WHI CH HAVE BEEN EXTRACTED ON PAGE NOS. 7 & 8 OF THE ASSESSMENT ORDER. IT WAS ALLEGED THAT CLIENT CODES WERE MODIFIED IN A STRUCTURED MANNER SO AS TO PROVIDE UNDUE BENEFIT TO THE ASSESSEE FIRM AS WELL AS TO THESE EN TITIES. ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 4 3.3 THE PRINCIPAL BROKER M/S IGSL, IN RESPONSE TO N OTICE U/S 133(6), SUBMITTED THAT ORDERS WERE RECEIVED BY THE SUB-BROK ERS TELEPHONICALLY AND THE RECEIPT OF ORDER WAS CREATED IN THE ORDER L OG AT THE RESPECTIVE TRADING TERMINAL OF THE SUB-BROKER. THE TRADES WERE CANCELLED / MODIFIED BASED ON THE REQUEST MADE BY THE CLIENTS FOR CORREC TING THE ERROR IN PUNCHING THE CLIENT CODE IN THE TRADING SYSTEM. 3.4 HOWEVER, THE ASSESSEE, VIDE SUBMISSIONS DARED 0 9/09/2015, SUBMITTED THAT THE TRANSACTIONS WHERE CODES WERE MO DIFIED BELONGED TO THE ASSESSEE AND THE MODIFICATION WAS GENUINE. THE MODIFICATIONS WERE EXECUTED BY THE BROKER TO RECTIFY POSSIBLE MISTAKES WHICH SHOULD BE CONTRIBUTED TO HUMAN ERROR. THE ATTENTION WAS DRAWN TO THE FACTS THAT MODIFICATION WAS ONLY TO THE EXTENT OF 1.15% WHICH WAS ATTRIBUTABLE TO HUMAN ERROR. THE CODE MODIFICATIONS WERE DONE BY TH E BROKER DUE TO WRONG PUNCHING OF SAUDA BY THEIR OFFICE AND THE ASSESSEE HAD NO ROLE IN SUCH MODIFICATIONS BUT IT WAS DONE BY VIRTUE OF MOD IFICATION PROCEDURE AS ALLOWED BY THE STOCK EXCHANGE NSE. 3.5 AFTER PERUSING THE REPLIES RECEIVED FROM M/S IG SL AND THE ASSESSEE, LD. AO REACHED A CONCLUSION THAT THE ASSE SSEE WAS ACTIVELY INVOLVED IN THE PRACTICE OF CLIENT CODE MODIFICATIO N. ALL THE TRADES WERE EXECUTED BY THE ASSESSEE ON HIS OWN TERMINAL AND CL IENT CODES WERE ALSO MODIFIED BY THE ASSESSEE FOR THEIR BENEFITS. T HE ASSESSEE CLARIFIED THAT IT PUNCHED ORDERS FOR F & O SEGMENT ON THEIR O WN TERMINALS AND SUBMITTED THAT CODE MODIFICATION WAS DONE IN CASES WHERE DEALER HAD MADE MISTAKE IN PUNCHING THE ORDER IN WRONG CLIENT CODE DUE TO LARGE NUMBER OF CLIENTS. MOST OF THESE ERRORS WERE RECTIF IED IMMEDIATELY UPON REALIZATION OF THE MISTAKE AFTER CLOSE OF TRADING H OURS. IT WAS ALSO ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 5 SUBMITTED THAT STOCK EXCHANGE HAD NOT CHARGED ANY P ENALTY / FINE FOR SUCH CCM TRANSACTIONS FOR THE YEARS UNDER CONSIDERA TION. THESE FACTS WERE SUBSEQUENTLY CONFIRMED BY M/S IGSL ALSO. 3.6 HOWEVER, NOT CONVINCED, LD. AO FORMED AN OPINIO N THAT THE CLIENT CODES WERE MODIFIED IN A STRUCTURED MANNER AFTER AS CERTAINING THE POSITION OF PROFIT / LOSS REQUIRED TO BE ACCOMMODAT ED. FEW OF THE CLIENTS WHOSE CODES WERE MODIFIED HAD COMMON ADDRESSES WHIC H WOULD LEAD TO A CONCLUSION THAT THE BENEFIT OF CCM WAS PROVIDED T O CERTAIN PERSONS OF SAME GROUP / FAMILY. 3.7 THE DATA COMPILED BY LD. AO REVEALED THAT THE N ET RESULT OF ALL CLIENT-CODE MODIFICATIONS WAS LOSS OF RS.347.17 LAC S WHICH WAS SIGNIFICANTLY DISPROPORTIONATE TO THE OVERALL PROFI T OF RS.637.95 LACS EARNED BY THE ASSESSEE IN F&O SEGMENTS. ALTHOUGH TH E MODIFIED TRADES WERE 1.15% IN TERMS OF TOTAL TRADE BUT THEY RESULTE D INTO MORE THAN 50% OF LOSS OF OVERALL PROFITS OF THE ASSESSEE. THEREFO RE, MODIFICATIONS COULD NOT BE ACCEPTED TO BE GENUINE. FINALLY, THE PROFIT OF RS.347.17 LACS WAS ALLEGED TO BE SHIFTED OUT OF THE BOOKS BY THE ASSES SEE AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. THE LD. AO MAD E ANOTHER ADDITION OF RS.3 LACS BEING ESTIMATED COMMISSION EARNED BY T HE ASSESSEE IN PROVIDING UNDUE BENEFITS TO THE CONTRA PARTIES BY R ESORTING TO CLIENT CODE MODIFICATION. 4.1 BEFORE LD. CIT(A), THE ASSESSEE, INTER-ALIA, SU BMITTED THAT IT WAS ALLOTTED A SUB-BROKER CODE NAMELY M1 TO CARRY OUT T HE TRANSACTIONS IN THE STOCK AND DERIVATIVES IN ITS OWN ACCOUNT. BESIDES B EING TRADER, THE ASSESSEE HAD SOME ENTITIES REGISTERED AS CLIENTS UN DER THE ASSESSEES CODE M1 FOR EXECUTING TRADES ON THEIR BEHALF. EACH OF THOSE CLIENTS WAS ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 6 ALLOTTED ONE CODE WHICH BEGAN WITH M1 FOLLOWED BY A NOTHER SERIAL NUMBERS. THE CLIENT CODE BEGINNING WITH M1 FOLLOWED BY ANOTHER SERIAL NUMBER WAS ONLY INDICATIVE OF FACTS THAT THESE CLIE NTS BELONGED TO THE ASSESSEE. DRAWING ATTENTION TO THE CCM DETAILS AS C OLLATED BY LD. AO, IT WAS SUBMITTED THAT THERE WAS REPETITION OF NAMES / ENTRIES. FURTHER FEW OF THE ENTITIES WERE NOT THE CLIENTS OF THE ASSESSEE B UT THE CLIENTS OF THE MAIN BROKER ONLY. THESE ENTITIES WERE CATEGORIZED A S CATEGORY-1 TRANSACTIONS. THE CCM TRANSACTIONS WITH ENTITIES WH ICH WERE CLIENTS BUT COVERED UNDER FAMILY AND RELATIVES WERE CATEGORIZED AS CATEGORY-2 TRANSACTIONS. THE CCM TRANSACTIONS WITH REMAINING E NTITIES WERE CATEGORIZED AS CATEGORY-3 TRANSACTIONS WHICH FORM T HE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. THESE TRANSACTIONS AGGREG ATED TO RS.85.29 LACS. 4.2 THE ASSESSEE CONTENDED THAT ASSESSEES OWN VOLU ME OF TRADES WAS AS HIGH AS 90% OF TOTAL TRADES UNDERTAKEN BY TH E ASSESSEE. SINCE THE ASSESSEES TRADE WAS HIGH, THE STAFF OF THE ASS ESSEE, IN ORDER TO SAVE TIME, HAD PREFIXED THE CLIENT CODE OF THE ASSESSEE IN THE SYSTEM AS DEFAULT WHICH LED TO PUNCHING ERRORS OF CLIENT CODE AT THE TIME OF TRANSACTIONS. THEREFORE, THE MISTAKES WERE NOT TYPO GRAPHICAL ERRORS BUT BECAUSE OF PUNCHING OF DEFAULT CODE AT THE TIME OF CARRYING OUT THE TRANSACTIONS ON BEHALF OF THE CLIENTS. THESE CODES WERE LATER ON MODIFIED TO CORRECT THE SAME. THE ATTENTION WAS DRAWN TO THE FACT THAT CCM TRANSACTIONS WERE 2720 IN NUMBER WHICH MERELY CONST ITUTE 1.15% OF TOTAL NUMBER OF TOTAL TRADES UNDERTAKEN BY THE ASSESSEE. THE ASSESSEE ALSO DEALT WITH VARIOUS OBJECTIONS RAISED BY THE LD. AO WHICH HAVE ALREADY BEEN TABULATED ON PAGE NUMBERS 29 TO 37 OF THE IMPU GNED ORDER. IT WAS ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 7 REITERATED THAT MODIFICATION WAS DONE TO CORRECT TH E GENUINE PUNCHING ERRORS WHICH TOOK PLACE AT THE TIME OF CARRYING OUT THE TRANSACTIONS. THE MECHANISM ADOPTED BY THE ASSESSEE WAS STATED TO BE A COMMON PRACTICE IN THE TRADE. THE ASSESSEE ALSO PLEADED TH AT ADVERSE MATERIAL AS RECEIVED FROM DIT (INV.) BEING RELIED UPON BY LD . AO WAS NEVER CONFRONTED TO THE ASSESSEE FOR REBUTTAL AND CROSS-E XAMINATION OF PERSONS CONVEYING SUCH INFORMATION. FURTHER, THE AD DITIONS MADE ON MERE PRESUMPTIONS AND SUSPICIONS WITHOUT ANY EVIDEN CES WOULD BE INVALID IN THE EYES OF LAW. THE LD. AO DID NOT BRIN G ON RECORD ANY MATERIAL TO SHOW THAT THE CLIENT-CODE MODIFICATION WAS NOT GENUINE ONE. THE ASSESSEE ALSO PLACED ON RECORD THE CONFIRMATION OF ALL THE CATEGORY- 3 CLIENTS WHO OWNED THE RESPECTIVE TRANSACTIONS CAR RIED OUT IN THEIR ACCOUNT. THEY ALSO SUBMITTED THAT THE INCOME SO EAR NED BY THEM WAS DULY REFLECTED IN THEIR RESPECTIVE INCOME TAX RETUR NS FOR THE YEAR UNDER CONSIDERATION. THE COPIES OF ALL SUCH CONFIRMATIONS HAVE ALSO BEEN PLACED BEFORE US IN THE PAPER-BOOK AND WE HAVE DULY CONSIDERED THE SAME. 4.3 SINCE THE ASSESSEE HAD FURNISHED ADDITIONAL EVI DENCES DURING THE COURSE OF APPELLATE PROCEEDINGS, A REMAND REPORT WA S SOUGHT FROM LD. AO VIDE LETTER DATED 15/11/2018 WHICH WAS FURTHER E XTENDED AT THE REQUEST OF LD. AO. HOWEVER, TILL THE DATE OF FRAMIN G OF THE IMPUGNED ORDER I.E. 07/02/2019, NO SUCH REPORT WAS FORTHCOMI NG AND THEREFORE, IT WAS PRESUMED THAT LD. AO HAD NOTHING TO SAY ON THE ISSUE. IN THE SAID BACKGROUND, THE MATTER WAS TO BE PROCEEDED WITH ON MERITS. 4.4 THE LD. CIT(A) NOTED THAT CLIENT-CODE MODIFICAT ION WAS PERMITTED AS PER APPLICABLE RULES OF INTRA-DAY TRANSACTIONS. THE MODIFICATION COULD BE ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 8 UP-TO 1% OF TOTAL ORDERS WITHOUT ATTRACTING ANY PEN ALTY WHEREAS THE HIGHER MODIFICATION WOULD ATTRACT PENALTIES IN THE RANGE OF RS.500/- TO RS.10,000/-. THE MODIFICATION UP-TO 5% WAS TO ATTRA CT MEAGER PENALTY OF RS.500/-. SINCE THE ASSESSEE HAD MODIFICATION ONLY TO THE EXTENT OF 1.15% OF TOTAL TRADES, IT WAS HELD THAT THE SAME WA S NOT OF THE MAGNITUDE SO AS TO TAKE AN ADVERSE VIEW BLINDLY. IT WAS NOTED THAT THE CATEGORY-3 TRANSACTIONS WERE WITH RESPECT TO ASSESSEES CLIENT S ON WHOSE BEHALF THE ASSESSEE HAD EXECUTED THE TRANSACTIONS IN F&O SEGME NT. AFTER CONSIDERING ASSESSEES SUBMISSIONS AND DOCUMENTARY EVIDENCES, LD. CIT(A) DELETED ADDITIONS FOR CATEGORY-1 AND CATEGOR Y-2 TRANSACTIONS BUT CHOSE TO CONFIRM ADDITIONS FOR CATEGORY-3 TRANSACTI ONS BY OBSERVING THAT THE MISTAKE OF CLIENT CODE COULD NOT BE REPEATED SO OFTEN AND IN A BRAZEN MANNER SEVERAL TIMES. THEREFORE, THE ADDITION FOR T HIS CATEGORY AGGREGATING TO RS.85.29 LACS WAS TO BE CONFIRMED. A S A LOGICAL CONSEQUENCE, THE COMMISSION INCOME OF RS.3 LACS AS ESTIMATED BY LD. AO WAS RESTRICTED TO THE EXTENT OF RS.73,703/-. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS. F ROM THE ENUMERATION OF FACTS, IT IS QUITE EVIDENT THAT THE PRACTICE OF CLIENT-CODE MODIFICATION IS PERMISSIBLE AS PER THE RULES OF STO CK EXCHANGES SINCE THE POSSIBILITY OF PUNCHING ERRORS COULD NOT BE RULED O UT AT THE TIME OF CARRYING OUT THE TRANSACTIONS AND HUMAN ERROR WAS I NEVITABLE. THE MODIFICATIONS TO THE EXTENT OF 1% COULD BE DONE WIT HOUT ANY PENALTY AND EVEN THE MODIFICATION OF 5% WOULD ATTRACT MEAGER PE NALTY OF RS.500/-. THE SAME WOULD SUPPORT THE FACT THAT DUE TO LARGE V OLUME OF TRANSACTIONS, THE PUNCHING ERRORS COULD NOT BE RULE D OUT WHILE CARRYING ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 9 OUT THE TRADES AND THEREFORE, A FACILITY WAS GIVEN TO THE STOCK-BROKERS TO MODIFY THE SAME WITHIN CERTAIN NORMS. WE FIND THAT NO SUCH NORMS HAVE BEEN SHOWN TO HAVE BEEN VIOLATED BY THE ASSESSEE WH ILE CARRYING OUT THE MODIFICATION. NO PENALTY IS SHOWN TO HAVE BEEN IMPOSED ON THE ASSESSEE SINCE THE MODIFICATION DONE BY THE ASSESSE E WAS ONLY TO THE EXTENT OF 1.15% OF TOTAL TRADES WHICH COULD NOT BE TERMED AS ABNORMAL ON THE GIVEN FACTS AND CIRCUMSTANCES. 6. WE ALSO FIND THAT THE WHOLE BASIS OF MAKING ADDI TIONS IN THE HANDS OF THE ASSESSEE IS INFORMATION OF DIT (INV.) WHEREI N IT WAS ALLEGED THAT THE PROFITS WERE SHIFTED BY CLIENT CODE MODIFICATIO N. TO SUBSTANTIATE THESE ALLEGATIONS WAS THE ONUS OF REVENUE. THE ASSESSEE H AD FILED CONFIRMATORY LETTERS OF ALL CATEGORY-3 CLIENTS WHER EIN ALL THESE CLIENTS OWNED UP THE TRANSACTIONS AND ALSO CONFIRMED THAT T HE PROFITS SO EARNED BY THEM ON THESE TRANSACTIONS WERE DULY REFLECTED I N THEIR RESPECTIVE RETURNS OF INCOME. THE COPIES OF CONFIRMATIONS HAVE BEEN PLACED ON PAGE NOS. 143 TO 172 OF THE PAPER-BOOK. THESE CONFI RMATIONS COULD NOT BE CONTROVERTED BY THE REVENUE. BY FILING THESE DOC UMENTARY EVIDENCES, THE ASSESSEE HAD DULY DISCHARGED ITS ONUS TO PROVE THE GENUINENESS OF THE MODIFICATIONS. THE LD. AO, DESPITE BEING PROVID ED WITH ANOTHER OPPORTUNITY BY WAY OF REMAND PROCEEDINGS, COULD NOT REBUT THE EVIDENCES FILED BY THE ASSESSEE AND FAILED TO BRING ON RECORD ANY ADVERSE MATERIAL AGAINST THE ASSESSEE TO DISLODGE T HE ASSESSEES CLAIMS. IT IS TRITE LAW THAT NO ADDITIONS ARE SUSTA INABLE IN LAW ON MERE DOUBTS, CONJECTURES OR SURMISES. THE ONUS WAS ON RE VENUE TO SUBSTANTIATE THE ALLEGATIONS WITH CORROBORATIVE EVI DENCES. HOWEVER, THIS ONUS HAS REMAINED UN-DISCHARGED. THEREFORE, THERE C OULD BE NO ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 10 JUSTIFICATION TO SUSTAIN THE ADDITIONS OF RS.85.29 LACS BY TREATING THE SAME AS THE INCOME OF THE ASSESSEE. OUR VIEW IS WEL L SUPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN PR.CIT V/S PAT COMMODITIES SERVICES PRIVATE LTD. (ITA NOS.1257 & 1 383 OF 2016 DATED 15/01/2019) WHEREIN THE REVENUES APPEAL WAS DISMISSED BY HONBLE COURT BY OBSERVING AS UNDER: - 3. THE RESPONDENT ASSESSEE IS A PRIVATE LIMITED COM PANY ENGAGED IN THE BUSINESS OF PROVIDING COMMODITY SERVICES TO ITS CLIENTS. IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07, THE ASSES SING OFFICER NOTICED THAT THERE WERE INSTANCES OF CLIENT CODE MODIFICATIONS. THE ASSESSING OFFICER BELIEVED THAT THE SAME WAS DONE TO INDULGE IN CIRCULAR TRADI NG TO PASS ON PROFITS OR LOSSES TO THE CLIENTS OF THE ASSESSEE COMPANY AS PER REQUIREM ENTS. AFTER HEARING THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITIONS IN T HE INCOME OF THE ASSESSEE ON SUCH BASIS. THE ISSUE EVENTUALLY REACHED TO THE TRI BUNAL. THE TRIBUNAL DID ACCEPT THE REVENUES THEORY OF MISUSE OF CLIENTS CODE MODI FICATION FACILITY. HOWEVER, THE TRIBUNAL ACCEPTED THE ASSESSEES EXPLANATION AND DI SCARDED THE REVENUES THEORY THAT PROFIT OF THE ASSESSEES COMPANY WERE PASSED O N TO THE CLIENTS. IT WAS ALSO NOTICED THAT THE REVENUE HAS NOT CONTENDED THAT THE CLIENT CODE MODIFICATION FACILITY IS OFTEN MISUSED BY THE ASSESSEE TO PASS ON LOSSES TO THE INVESTORS, WHO MAY HAVE SIZABLE PROFIT ARISING OUT OF COMMODITY TRADING AGA INST WHICH SUCH LOSSES CAN BE SET OFF. THE REVENUE NORMALLY POINTS OUT NUMBER OF SUCH INSTANCES OF CLIENT CODE MODIFICATIONS AS WELL AS NATURE OF ERRORS IN FILLIN G OF THE CLIENT CODE. AT ANY RATE, WHAT CAN BE TAXED IN THE HANDS OF THE PRESENT ASSESSEE I S THE INCOME ESCAPING ASSESSMENT. EVEN IF THE REVENUES THEORY OF THE ASS ESSEE HAVING ENABLED THE CLIENTS TO CLAIM CONTRIVED LOSSES, THE REVENUE HAD TO BRING ON RECORD SOME EVIDENCE OF THE INCOME EARNED BY THE ASSESSEE IN THE PROCESS , BE IT IN THE NATURE OF COMMISSION OR OTHERWISE. IN THE PRESENT CASE, THE A SSESSING OFFICER HAS ADDED THE ENTIRE AMOUNT OF DOUBTFUL TRANSACTIONS BY WAY OF AS SESSEES ADDITIONAL INCOME, WHICH IS WHOLLY IMPERMISSIBLE. WE DO NOT KNOW THE F ATE OF THE INDIVIDUAL INVESTORS IN WHOSE CASES, THE REVENUE COULD HAVE QUESTIONED THE ARTIFICIAL LOSSES. BE THAT AS IT MAY, WE DO NOT THINK ENTERTAINING THESE APPEALS WOU LD SERVE ANY USEFUL PURPOSE. RESPECTFULLY FOLLOWING THE SAME AND NOT CONVINCED W ITH LEGALITY OF ADDITIONS SO MADE BY THE REVENUE, WE DELETE THE IMP UGNED ADDITIONS SAME AND ALLOW THE GROUNDS THUS RAISED BEFORE US. C ONSEQUENTLY, THE COMMISSION INCOME AGAINST THESE TRANSACTIONS WOULD ALSO NOT SURVIVE. BOTH THE GROUNDS AS URGED BEFORE US STANDS ALLOWED. ITA NO.1944/MUM/2019 M/S MUDRA SECURITIES ASSESSMENT YEAR: 2010-11 11 7. IN THE RESULT, THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 08 TH DECEMBER, 2020. SD/- SD/- (AMARJIT SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08/12/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,-$. , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.